Softbank Group CEO Masayoshi Son (Yuichi Yamazaki/Getty Images)

Weird Money

One guy who has no problem with the OpenAI leadership exodus: Masayoshi Son

SoftBank is back, making a $500 million splash with its OpenAI investment.

10/1/24 3:18PM

Last Thursday, I wondered whether or not a wave of resignations from key OpenAI executives over the last year, including three last week, would cause investors to hesitate as they considered writing new checks to OpenAI at a $150 billion valuation. At least one investor wasn’t concerned: Masayoshi Son, the founder and CEO of Japanese investing group SoftBank.

The Information reported that SoftBank’s Vision Fund has agreed to invest $500 million in OpenAI’s latest funding round, valuing the company at $150 billion, joining Thrive Capital, which has agreed to invest “more than $1 billion,” as well as Microsoft and other backers.

Son has had an… interesting journey investing in technology companies, to say the least.

Son briefly became the richest man in the world in the late 1990s after betting heavily on tech during the dot-com bubble, but when the bubble burst, he gained the distinction of having lost more money than any other person in history as SoftBank’s stock collapsed 99%. However, Son turned an initial $20 million bet (SoftBank eventually invested a total of $53 million) on Jack Ma’s Alibaba in 2000 into a $72 billion gain by the time the company exited its position in 2023, and in 2020, its 25% stake in Alibaba was worth more than SoftBank’s own market capitalization.

In 2022, SoftBank’s Vision Fund posted a $27.4 billion loss, largely due to poorly-timed investments in different tech companies, such as WeWork, at nosebleed valuations, and in November of that year, Son personally owed his company $4.7 billion. BUT, as with Alibaba, one outsized position saved his portfolio. Softbank acquired British semiconductor company Arm Holdings for $31.4 billion in 2016 and took it public at $51 per share for a $54 billion valuation in 2023, after European regulators blocked an Nvidia acquisition.

Arm is now trading at $138 per share, or a $145 billion market capitalization, thanks to AI tailwinds, and SoftBank still hasn’t sold its 90% stake, which is now worth approximately $130 billion.

Basically the story of SoftBank, over the last 25+ years, has been boom, bust, boom, bust, boom, with Son going all-in on hot markets at sky-high valuations, suffering multi-billion dollar losses when the market turns, and proceeding to make it all back on one well-timed investment. I’m not saying that OpenAI is his 2024 “lose it all” moment, especially considering that he is “only” investing $500 million, and, yes, OpenAI is predicting that its revenue will jump from an estimated $3.7 billion in 2024 to $11.6 billion in 2025 (though let’s not talk about its profitability). But I do think it’s fitting that, while key OpenAI employees are resigning in droves, Apple just pulled out of the funding round, and OpenAI is being valued at the same level as Goldman Sachs, Son is the one new investor ready to lay his money on the line.

Never change, Masayoshi Son.

Tasha Matsumoto

Stocks eke out gains on hopes for a path forward for reopening the Strait of Hormuz

Stocks rebounded on news that Iran is drafting a protocol with Oman to “monitor transit” through the crucial Strait of Hormuz.

Matt Phillips7h

AI server cluster maker Penguin Solutions takes flight

Small-cap AI server cluster maker Penguin Solutions surged Thursday after posting better-than-expected Q2 revenue and profit numbers Wednesday after the close, along with an increase in full-year sales and profit guidance.

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

Its Advanced Computing division designs and sells computers, cabling, and cooling systems, the server racks and clusters of racks AI data centers need. Its other main division sells flash and DRAM memory products.

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

The stock is volatile. Penguin dove during last year’s tariff tantrum that followed “Liberation Day” in April. Then it turned tail and doubled through early October amid a surge of call options activity, which tends to reflect retail interest. From the October peak, it then plunged by about 50%, before Thursday’s renaissance.

For what it’s worth, call options activity in Penguin is pretty busy today, too — relatively speaking — with roughly 2,625 traded as of 1:15 p.m. ET. That’s the most since early January, when the company last reported quarterly numbers. The average volume over the previous 25 trading sessions is about 325 calls a day, FactSet data shows.

Penguin Solutions Stock Takes Off On AI Bolstered Outlook

The company, which was known as Smart Global Holdings until July 2024, has positioned itself as a provider of “end-to-end AI infrastructure solutions.”

It’s a pretty small company, with a fully diluted market cap of just over $1 billion and roughly 2,900 employees, according to FactSet.

Luke Kawa10h

Momentum returns to optics stocks as the release valve for AI optimism

Potentially imminent end to the war? Buy optics stocks.

Maybe not? Buy optics stocks anyway.

Effectively all the juice left in the AI trade is coming from optics (and memory) stocks. And the latter group is taking a bit of a breather today while the former continues to surge.

Shares of Ciena Corp., Lumentum, and Coherent are building on recent big gains and among the biggest gainers in the S&P 500 near midday, while Applied Optoelectronics is also surging on Thursday.

These companies all provide solutions that help information move around in data centers, and thus are key beneficiaries of the aggressive capex plans of hyperscalers. Nvidia has invested $2 billion apiece in Coherent and Lumentum in deals that also include purchase commitments.

Matt Phillips10h

Space stocks rip during a topsy-turvy day for the equity market

Satellite-services-from-space stocks surged Thursday after reports that Amazon is in talks to buy Globalstar, which provides voice and connectivity services from its satellite network. It also can’t hurt that the general mood around space is ebullient, following the successful launch of Artemis II on Thursday.

Planet Labs and ViaSat also soared on the news.

The gains for EchoStar — seen as a backdoor play at pre-IPO SpaceX exposure — and Rocket Lab were more muted, perhaps because a deep-pocketed competitor like Jeff Bezos getting serious about space services could complicate the plans of the two largest commercial space launch companies.

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Tesla CEO Elon Musk’s SpaceX is the dominant provider of such services, and the early rumors on the company’s planned IPO — expected to be the largest ever — suggest the market is very excited about the prospects for the industry.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

Globalstar surges after FT reports that Amazon is in talks to buy the satellite group

Rocket Lab and SpaceX see launch services as key to their aspirations of being major providers of voice and data services from low-Earth orbit satellites.

Elsewhere in the space stock world, Intuitive Machines — a maker of space infrastructure that provides services to NASA for lunar missions — also rose.

Hyunsoo Rim, David Crowther

Can Sandisk do the double?

11h

The S&P 500 just had its worst quarter in years. Here are the biggest winners and losers.

Sandisk and energy stocks soared while software names sank amid a broad sell-off in tech stocks.

Balancing balls of different sizes on pink seesaws creating equilibrium